My favourite UK stock just plunged 19% — is it now a screaming buy?

Till not too long ago, my favourite UK stock was non-public fairness specialist 3i Group (LSE: III). It was my first buy to double in worth after I populated my brand-new SIPP in 2023. At one level, I thought of taking some revenue and decreasing my publicity to the FTSE 100 high-flier. Now I want I had.

The 3i share value plunged one other 19% this morning as full-year outcomes disenchanted. The shares peaked at 4,447p final October. Immediately, they’re at 2,014p, a drop of 54%. As ever when a portfolio holding suffers a sharp reversal of fortunes, I ask myself the identical query: ought to I purchase extra?

Is that this an unmissable FTSE 100 shopping for alternative?

Which will sound loopy and counter-intuitive, however shopping for on the dips can repay properly over the longer run. Out of the blue, there’s a hefty low cost on provide. Inevitably, there are dangers too. Worse, I noticed these dangers coming.

3i has been working a portfolio of corporations since 1946, shopping for companies, funding them, constructing them up and promoting them on. Immediately, it’s largely a play on its most profitable holding, European non-food low cost retailer Motion.

The chain has unfold quickly throughout the continent and now has greater than 3,300 shops. It additionally makes up roughly 70% of the general 3i portfolio. That’s a lot of focus danger. My different fear was that Motion had grown so shortly that even the slightest trace of slowing momentum can be punished. That’s precisely what’s occurred.

We obtained the primary warning shot final yr. French development slowed, 3i shares slumped. Immediately’s outcomes for the yr to 31 March repeated the sample.

If you happen to’re anticipating a disastrous set of figures or a revenue warning, you’d be fallacious. 3i really reported a 19% improve in diluted internet asset worth per share to three,030p. It additionally introduced a £750m share buyback. Chief govt Simon Borrows hailed “one other good yr”. So what’s the issue?

Whole return on opening shareholders’ funds jumped 22%, however that was down from 25% final yr. Motion’s internet gross sales rose a stable 14% to €4.01bn within the first three months of 2026. Nevertheless, like-for-like gross sales development slowed from 6.8% to 2.4%. Cooler climate, more durable comparisons and Iran considerations have been accountable. Shops in France and Germany struggled. The joy has ebbed.

Has the sell-off been overdone?

I’m not going to promote my stake. These are tough instances for consumer-facing shares as inflation flares up, and I count on 3i to get well over the subsequent few years. I do remorse turning into overexposed, although. It had grown into my largest single portfolio holding. Alas, not.

Now right here’s what I believe is the most important attraction. Lately, the funding belief traded at a hefty premium to underlying internet asset worth, usually as excessive as 15%. Immediately, it’s at a 21% low cost. The following yr might be bumpy, however I’ll be watching 3i intently. As an alternative of promoting, I’m tempted to purchase a little extra. This stock as soon as appeared costly. It doesn’t at this time.